Interest Only Mortgage question

mic1000

I have a repayment mortgage with HSBC and wanting the repayment portion of monthly payments to generate a better return, applied for an interest-only mortgage with them.

I don't have any glitches on my credit file and was still refused on the basis of not having enough of a history of paying into the repayment vehicle I'd nominated - an ISA. It seems it's a case of chicken an egg - you need to already show you're saving the repayment portion to get an interest only mortage, but only have that money available when you've got the mortgage!

As others have said, and I've heard elsewhere, HSBC are strict as they can afford to be.

However, subsequently talking to a mortgage broker he suggested that being able to show a 12 month record of significant monthly payments into (what would become) a repayment vehicle is, or is becoming, a standard requirement to get an I-O mortgage.

But I was also looking at ING Direct and so will phone them to discuss they're lending criteria up front.

Rikki

I have a part repayment and part interest only mortgage. Have you considered doing this rather than a 100% interest only mortgage?

I do have life insurance in place should anything unfortunate happens.

Thrugelmir

mic1000 wrote: »

I have a repayment mortgage with HSBC and wanting the repayment portion of monthly payments to generate a better return, applied for an interest-only mortgage with them.

The likelihood is that the ISA would require a higher monthly saving than the capital element of a mortgage payment. To reflect the greater volatilty and risk of the investment.

Your plan may work for a period of time, but not for the whole duration.

kingstreet

From HSBC website, for future ref;-

Interest only

With an interest only option, your monthly payment covers only the interest charged on your mortgage, freeing up cash to spend elsewhere or to invest to pay off your mortgage at the end of the mortgage term.

By repaying only the interest on your mortgage, your monthly repayments are lower than with an equivalent capital repayment mortgage.

Note: You are responsible for making your own arrangements to repay your mortgage at the end of the mortgage term. This could be through an endowment scheme or some other savings and investment plan. Your property may be repossessed if you do not have sufficient funds to repay the capital balance outstanding at the end of the term.

What you get with the Interest only option:

Interest only - the monthly payment covers just the interest and the original capital amount borrowed remains outstanding throughout the term of the loan

Lower monthly payments - because you are not repaying the capital your monthly payments will be lower than with a capital repayment mortgage

Lending criteria - Sole applicants must have a minimum salary of £30,000. Joint applicants must either have a minimum combined salary of £50,000, or one party have an individual salary of £30,000 or more

Choose your mortgage loan term - up to a maximum of 25 years

Lower borrowing limit - up to a maximum of 75% of the purchase price or the valuation of your property (whichever is lower)

Availability - Interest only loans are restricted to home buyers or customers remortgaging from a competitor. Not available to existing customers borrowing further funds.

Important Considerations

Demonstrate you have a suitable repayment vehicle in place

JimmyTheWig

Thrugelmir wrote: »

What makes you so sure that every so often documentary evidence will not have to be produced?

Only a couple of days ago the Halifax announced far tighter regulation of interest only mortgages.

Just from my experience. Had never heard of anyone having to prove that their repayment vehicle was on track.
Hadn't heard the Halifax announcement, though.